Saturday, December 25, 2010

Thought leaders in politics, economics and business recently gathered at the Gordon Institute of Business Science (GIBS) to forecast how the world will change in the year ahead. They concluded that the global economy will continue to tremble and the South African political arena will once again endure many highs and lows.

Adrian Saville, CEO of Cannon Asset Managers and a senior lecturer at GIBS, identified the greatest challenge for the world in 2011 as being whether or not the traditional powers could break free from the fetters of the recession.

In Saville’s view the developed economies, the US and the EU in particular, had failed to see that this is “no ordinary recession.” The ever-increasing mountain of debt these countries are having to pay off will eventually lead them into a situation similar to that experienced by Japan in the 1990s and 2000s, where endless debt obligations hampered long-term growth.

“The fact that our three largest trading partners, and our three largest investment partners, Japan, Western Europe and North America are going to continue to stutter causes headwinds for South Africa,” he cautioned.

But potential openings also existed for South Africa out of the re-alignment in the international political economy. “We tend to be enamoured with the China and India story, yet Sub-Saharan Africa is growing almost as fast as India and the per capita incomes of Sub-Saharan Africa are higher than India.” he noted. “So we are embedded in an incredible opportunity.”

Dr. Lyal White, a consultant and lecturer at GIBS, echoed this view and noted that 2011 would mark the start of the decade of the Dynamic Markets. He predicted that mature markets would grow by 1.7% (at best), while dynamic markets would grow at an average of about 6.5%. “In short, growth has really shifted from the North and the West, to the South and the East and debt has moved decisively to the North,” he said.

Phuthuma Nhleko, Group President and CEO of MTN, also marvelled at how the tectonic plates of the global economy were shifting. Like Saville, Nhleko saw a chance for SA, Inc. to take advantage of this crisis, especially as corporations begin to engage more actively in the continent (as MTN had done to great success). "Africa is in effect the best-kept open secret from an investment perspective - and a return perspective," he said.

Nhleko also commented on the decline of some of the formerly venerable institutions of the West. “If you had said five years ago that some of the sovereign funds would be taking over Citibank and UBS and so on, somebody would have said ‘you’re smoking something’, but the reality is that this has happened and I think for me that is a fundamental change.”

For Nhleko, demography was a key barometer of future competitiveness, with Europe and Japan rapidly ageing, and the youthful populations of India and China swelling the size of their workforces at a remarkable rate.

Focusing on the public sector and the political realm back home, executive director of FeverTree Consulting, Roelf Meyer argued that the issue of service delivery would be one of the defining points of the coming year and beyond.

“There are huge, huge problems in this area, and they are not decreasing,” he said. “On a daily basis there are more and more local authorities that can’t supply some sort of service that is desperately needed by the people that they are supposed to deliver to.”

Water, electricity and sanitation were all affected, he noted, and those who suffer the most are those who cannot afford to pay for alternative services.

Meyer also observed that this deterioration was not confined to remote areas, pointing to the supposedly developed town of Stellenbosch in the Western Cape, which is experiencing severe capacity problems. Meyer speculated that campaigning for the local elections in 2011 would lead to even greater delivery shortfalls.

Gauteng MEC for Education, Barbara Creecy discussed some of the immense challenges that have arisen in education, particularly following the prolonged public sector strike that gripped the country in August.

Creecy explained that although the question of “redress, access and equity” in the education system had largely been resolved since 1994, the issue of learner performance needed to be addressed, particularly in maths, sciences and literacy.

Creecy said that institutional factors and the impact of poverty were affecting the state’s ability to make these improvements, and that internal migration and deteriorating facilities were taking their toll. “So not only have we not managed to address historical back-logs, but the back-logs in fact get greater and greater.”

Compounding the problem, approximately 60% of this year’s curriculum simply wasn’t covered owing to an inability on the part of teachers to fully engage with course material. The problem is teacher understanding and knowledge of curriculum content, the MEC said, and not teachers’ level of qualifications, which are relatively high. As an illustrative example, Creecy admitted that in 2008 the department had a sample of matric maths teachers write the grade 6 maths exam and only 60% of them passed.

Shaka Sisulu of Cheesekids argued that young people would react strongly to the increasingly more testing and rapidly evolving environment bestowed upon them by their elders. Sisulu warned that the current establishment will resist some of the pressures of this transition.

“Even though we have always seen the youth being vigorous, and vigorously challenging the status quo, there is [now] a lot more at stake for the status quo globally, but particularly in South Africa.”

Gary Morolo, Chairman of Datacentrix, spoke about the general feelings of anxiety in the country when looking to the future. “As South Africans we have extreme sentiment swings. We are either wildly euphoric or we are deeply pessimistic and we are in one of those phases where we say ‘this country is going to the dogs’.”

While many of these problems are cause for concern, Morolo said it is possible to be vigilant in guarding against abuses of power without resorting to hysteria. To do this the country needs strong checks and balances.

“What we have to ensure is that those important structures of state that are constitutionally protected continue to be that way, that we don’t find ourselves in a position where our institutions are perverted…where we allow the Constitution to be subverted in any way. So long as people are not touching those institutions then we have recourse to do something about it,” he said.